3.1.1 - types of businesses

Question 1

Types of businesses

Answer 1

sole trader, partnership, private limited company, public listed company, social enterprise, government business enterprise

Question 2

sole trader

Answer 2

an individual establishing and operating their own business, assuming total responsibility for the major business decisions

Question 3

sole trader - advantages

Answer 3

simple and inexpensive to establish, no partner disputes, owner has total control over the business and keeps all profit

Question 4

sole trader - disadvantages

Answer 4

unlimited liability for owner, business ends when owner dies (no perpetuity), burden of management

Question 5

partnership

Answer 5

a business combined with the resources of 2-20 partners

Question 6

partnership - advantages

Answer 6

inexpensive and simple to set up, workload may be shared, risk is shared

Question 7

partnership - disadvantages

Answer 7

unlimited liability, potential for disputes and personality clashes, liability for debts incurred by other partners

Question 8

companies

Answer 8

a separate legal entity that is owned by shareholders who have limited liability and is run by directors and has perpetual succession

Question 9

private limited company (PTY LTD)

Answer 9

between 2-50 shareholders

Question 10

PTY LTD - advantages

Answer 10

limited liability for owners (shareholders), separate legal entity, existence is not threatened by death of removal of one of the directors

Question 11

PTY LTD - disadvantages

Answer 11

higher establishment costs, higher degree of complexity in establishing, additional compliance costs

Question 12

public listed company (LTD)

Answer 12

listed in the ASX, at least 5 shareholders

Question 13

LTD - advantages

Answer 13

limited liability for shareholders, able to gain extra capital through extra shares, separate legal entity

Question 14

LTD - disadvantages

Answer 14

highly complex structure, high establishment costs, needs more accountability

Question 15

social enterprise

Answer 15

private sector business that distributes profit to benefit the community rather than individual shareholders, uses strategies to maximise improvements for human wellbeing and environment

Question 16

social enterprise - advantages

Answer 16

can open up new markets, and meeting a social need can have positive effects on profit and market share

Question 17

social enterprises - disadvantages

Answer 17

might be difficult to obtain capital to start the business, can be hard to finance, significant operating cost, can be difficult to focus on both social and financial objectives

Question 18

government business enterprise

Answer 18

a business that is government owned and operated that aims to be profitable and provide a service to the community

Question 19

GBE - advantages

Answer 19

can carry out government policies, can operate with independence from government, healthy competition

Question 20

GBE - disadvantages

Answer 20

political interference, can be less effective, less accountability